Interest Growth Formula

Introduction to Interest growth formula:

Interest growth can calculated in two ways, they are

Simple interest growth

Compound interest growth

Simple interest growth:

The interest that is paid for only the borrowed amount not to interest calculated on the original amount.

Compound interest growth:

The interest that is paid not only for the borrowed amount but also to interest calculated on the original amount.

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Formula to Find Simple and Compound Interest Growth

Formula for calculating simple interest growth:

Interest= P*I*N

Here p is the original amount

I is the rate of interest

N is the number of years.

Formula for calculating compound interest growth:

A = P (1 + `r/q` ) nq  

Here (here the interest is compounded q times a year)

P is amount borrowed

r is the rate of interest

n is the number of year

q is the number time the interest is compounded.

A= P (1 + r) n 

Here the interest is compounded only one time  in a year

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Model Problems on Interest Growth Formula

Example: 1

Find the simple interest growth for the amount of 500$ and the rate of interest is 5% for 3 years

Solution:

Formula for calculating simple interest growth:

Interest= p*I*N

Here p is the original amount = $500

I is the rate of interest = 5%

N is the number of years = 3

Interest = 500*5%*3

Interest = 500*(5/100)*3

Interest = 5*5*3

Interest = $75

So the simple interest growth is $75

Example: 2

Find the amount using compound interest growth for the amount of 100$ and the rate of interest is 3.5% for 5 years if it is compounded 4 times?

Solution:

Formula for calculating compound interest growth:

A = P (1 + `r/q` ) nq

Here

P is amount borrowed = $1000

r is the rate of interest = 3.5%

n is the number of year =5

q is the number time the interest is compounded, q=4

Interest = 1000(1+ `(.035)/4` )20

=$1190.34

Amount after the 5years is $1190.34